2 leisure stocks to buy this week
After breaking a three consecutive weeks of defeats last week, the market is grappling with the inflation data released today. The consumer price index (CPI) in August reflected a 8.3% increase year over year and 0.1% compared to the previous month. Economists had expected headline inflation to fall by 0.1%.
Prices were lifted by increases in food, housing and medical services, offsetting a sharp decline in gasoline prices.
To combat soaring inflation, the Federal Reserve has hiked interest rates four times this year and is expected to make a third straight hike of 75 basis points next week. The Federal Reserve reiterated that it will continue to raise interest rates until it reaches its long-term inflation target of 2%. Therefore, the market should remain under pressure.
However, given that U.S. out-of-pocket spending on leisure services is expected to grow at a 9.9% CAGR until 2026, it could be wise to invest in fundamentally solid leisure stocks Playa Hotels & Resorts NV (PLYA) and Accel Entertainment, Inc. (ACEL).
Playa Hotels & Resorts S.A. (PLYA)
PLYA owns, develops and operates all-inclusive beach resorts in Mexico and the Caribbean. The company manages a portfolio of 22 resorts with 8,366 rooms in Mexico, Jamaica and the Dominican Republic. It also offers and organizes weddings, accommodations, dining, entertainment, meetings, events and other hospitality services at its hotels.
On August 2, 2022, PLYA agreed to manage the famous Seadust Cancun Family Resort in Mexico. This collaboration accentuates PLYA’s position as a leading player in hotel management.
PLYA’s total net income was $214.09 million for the second quarter ended June 30, 2022, up 72.1% year-over-year. Adjusted sound EBITDA grew 169.3% year over year to $61.70 million. Additionally, the company’s adjusted net profit was $24.87 million, compared to an adjusted net loss of $9.56 million a year ago. Additionally, its adjusted EPS was $0.15, compared to an adjusted loss per share of $0.06 in the same period last year.
Analysts expect PLYA’s FY2023 EPS to rise 31.2% year-over-year to $0.66. Its revenue for the third quarter ending September 30, 2022 is expected to increase 30% year-over-year to $196.71 million. Over the past month, the stock has fallen 9.1% to close the last trading session at $6.67.
PLYA’s strong fundamentals are reflected in its POWR Rankings. According to our proprietary rating system, it has an overall A rating, which translates to a strong buy. POWR ratings rate stocks on 118 different factors, each with its own weighting.
It has an A rating for sentiment and a B for growth, value and quality. It is ranked No. 2 out of 21 stocks in the B rating Travel – Hotels/Resorts industry. Click here to see PLYA’s additional notes for Momentum and Stability.
Accel Entertainment, Inc. (ACEL)
ACEL is one of the leading distributed game operators in the United States. It is involved in the installation, maintenance and operation of gaming terminals; redemption devices that pay out winnings and contain automated teller machine (ATM) functionality; and other amusement devices in licensed locations other than casinos, such as restaurants, bars, taverns, convenience stores, liquor stores, truck stops, and grocery stores.
On June 1, 2022, ACEL acquired Century Gaming, Inc., one of the leading distributed gaming operators in the Western United States. With this acquisition, the company is expected to expand its portfolio and business model into new markets.
During the second fiscal quarter (ended June 30, 2022), ACEL’s net revenue increased 13% year-over-year to $227.87 million. Its operating profit rose 9.6% year-over-year to $27.32 million, while its net profit rose 80.5% year-on-year previous year to reach $22.46 million. Additionally, its EPS came in at $0.24, up 84.6% year-over-year.
Analysts expect ACEL’s EPS and revenue to increase 35% and 39.6% year-over-year to $0.25 million and $269.87 million, respectively, during the third fiscal quarter (ending September 2022).
ACEL has lost 8.1% over the past month to close the last trading session at $9.60.
ACEL’s POWR ratings reflect a strong outlook. The stock has an overall rating of B, which is equivalent to a buy in our POWR rating system. ACEL also has a B rating for growth, value and quality. The title is ranked #2 out of 28 in the Entertainment – Casinos/Gambling industry.
Click here to view ACEL ratings for Momentum, Stability, and Sentiment.
PLYA shares were trading at $6.46 per share on Tuesday afternoon, down $0.21 (-3.15%). Year-to-date, the PLYA is down -19.05%, compared to a -15.75% rise in the benchmark S&P 500 over the same period.
About the Author: Shweta Kumari
Shweta’s deep interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make informed investment decisions. After…